Memorandum of Association
Under Company Law, a company is an artificial legal person created by law. It cannot come into existence or function without foundational documents that define its identity, powers, and scope of activities. The Memorandum of Association (MOA) is one such vital document. It acts as the charter of the company and lays down the fundamental conditions upon which the company is incorporated. Alongside the Memorandum, the Articles of Association (AOA) regulate the internal management of the company. Together, these documents form the backbone of corporate governance under the Companies Act, 2013.
This essay explains the contents of the Memorandum of Association and describes the relationship between the Memorandum of Association and the Articles of Association, highlighting their legal significance and practical application.
Meaning and Importance of Memorandum of Association
The Memorandum of Association is defined under Section 2(56) of the Companies Act, 2013. It is a legal document that specifies the company’s objectives, powers, scope of operations, and its relationship with the outside world.
The MOA serves the following purposes:
- It defines the area beyond which a company cannot operate
- It informs shareholders and creditors about the company’s permitted activities
- It acts as a constitution of the company
- It protects investors by ensuring funds are used only for authorized objectives
Any act done beyond the scope of the MOA is considered ultra vires and therefore void.
Contents of Memorandum of Association
According to Section 4 of the Companies Act, 2013, the Memorandum of Association must contain the following clauses:
Name Clause
The Name Clause states the legal name of the company. The name must not be identical or deceptively similar to an existing company and must comply with the guidelines issued by the Central Government.
- A Public Limited Company must end with the word “Limited”
- A Private Limited Company must end with “Private Limited”
This clause establishes the company’s identity and brand recognition.
Registered Office Clause (Situation Clause)
This clause specifies the State in which the registered office of the company is situated. It determines:
- The jurisdiction of the Registrar of Companies (ROC)
- The applicable state laws and courts
- The location where statutory records are maintained
This clause ensures transparency and legal certainty regarding the company’s official address.
Object Clause
The Object Clause is the most important clause of the Memorandum. It defines the purpose for which the company is formed. It is divided into:
- Main Objects – Primary business activities
- Incidental or Ancillary Objects – Activities necessary to achieve main objects
The company can operate only within the objects stated. Any activity beyond this clause is ultra vires and unenforceable. This clause protects shareholders and creditors from misuse of company funds.
Liability Clause
The Liability Clause specifies the extent of liability of the members:
- Limited by Shares – Liability limited to unpaid amount on shares
- Limited by Guarantee – Liability limited to the guaranteed amount
- Unlimited Company – Members have unlimited liability
This clause informs members about their financial exposure in case of liquidation.
Capital Clause
The Capital Clause states:
- The authorized share capital of the company
- The division of capital into shares of a fixed value
This clause determines the maximum amount of capital the company can raise and provides clarity to investors regarding capital structure.
Subscription Clause
The Subscription Clause contains a declaration by the original subscribers stating their intention to form the company and take up shares.
It includes:
- Names, addresses, and occupations of subscribers
- Number of shares subscribed by each
- Signatures of subscribers and witnesses
This clause confirms the voluntary formation of the company.
Meaning of Articles of Association
The Articles of Association (AOA) are defined under Section 2(5) of the Companies Act, 2013. They contain the rules and regulations governing the internal management of the company.
The Articles deal with matters such as:
- Issue and transfer of shares
- Conduct of meetings
- Powers and duties of directors
- Dividend policy
- Winding up procedures
While the Memorandum defines what the company can do, the Articles explain how the company will do it.
Relationship between Memorandum of Association and Articles of Association
The Memorandum of Association and Articles of Association are closely related and must be read together for a complete understanding of company law.
MOA is Supreme over AOA
The Memorandum is the supreme document of the company. The Articles are subordinate to it. If there is any conflict between the MOA and AOA, the Memorandum prevails.
Articles cannot override or expand the powers defined in the Memorandum.
MOA Defines Scope, AOA Regulates Management
- The MOA defines the external boundaries of the company
- The AOA regulates internal affairs
Thus, MOA sets the limits, and AOA operates within those limits.
Articles Cannot Authorize Ultra Vires Acts
If an act is outside the scope of the Memorandum, the Articles cannot validate it. Such acts are void even if permitted by the Articles.
This principle was upheld in the landmark case Ashbury Railway Carriage Co. v. Riche.
Memorandum is Mandatory, Articles are Flexible
Every company must have a Memorandum. However, companies may adopt model articles or frame their own Articles.
This shows the rigid nature of the Memorandum and the flexible character of the Articles.
Public Document Doctrine
Both MOA and AOA are public documents filed with the Registrar of Companies. Any person dealing with the company is presumed to have knowledge of their contents.
This legal concept is known as constructive notice.
Mnemonic Sentences (For Easy Memorization)
Contents of Memorandum of Association
Mnemonic: “N R O L C S”
N – Name Clause
R – Registered Office Clause
O – Object Clause
L – Liability Clause
C – Capital Clause
S – Subscription Clause
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